Saving Money - part 1

Saving Money:

The emergency fund (or savings account) is putting your family's needs first.

The Wall Street Journal reported that the average American family saves -2.2%. Yes that is a NEGATIVE 2.2%. Americans have been spending more than they make and not saving anything for a long long time. It has only recently become a trend to squirrel a little bit of money away in savings, and most people only have a couple hundred dollars in savings. Prophets and apostles have been telling us for years to have an emergency fund. We do not want to be like those people who didn't listen to Noah when he was building the Ark. We are being warned people - the time to act is now. The prophets and apostles aren't just saying this stuff to be saying it. They are trying to protect us and help us protect ourselves and our families. This stuff is important, so why aren't we doing it?

You will only save money when it becomes very, VERY important to you.

How many of you are parents or hope to be one day? How many of you have a kid somewhere on the planet that you kind of like? What if you found out that there was a new disease wiping out kids everywhere, and that you had to pay for a special surgery that insurance didn't cover? The stipulations were that you had to pay $10,000 up front for the cost of the surgery, you couldn't borrow the money or use "bill me later". You couldn't borrow the money from family and friends and it couldn't be money you already had in savings. Would you be able to come up with the $10,000 in 9 months to save your child's life? You bet you would! You'd be thinking "let's get a 2nd or 3rd job, let's cut the cable, let's have yard sales, let's eat beans and rice, rice and beans because THIS IS SERIOUS, THIS MATTERS!" Well folks, this IS serious, this matters! We have an entire generation of people who think that the government is going to take care of them when they retire. This same government who just spent a trillion dollars that it doesn't have, is going to take care of them! If you aren't to retirement age yet, and you're banking on the government to take care of you, then you'd better pick up the book "101 Ways to Eat Alpo and Love It." If you're 30 years old, you should believe more in UFOs than in Social (In)Security. If you think Social Security works, you can't do math. Savings has to become a priority, and you have to make it a priority.

Like tithing, you have to take it off the top or else it won't get done. You pay the Lord first, then yourself, then your debts and then the rest can be divided up any way you want. This does NOT mean to not pay your bills so you can save money. Pay your bills, stay current, but if you have any leeway in your budget, you need to be saving some money somewhere. If you wait and don't do it at the top of the budget, the termites are going to come and carry that money away before you know what happened to it.

Proverbs 21:20, "There is a treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up." If you spend everything that you make, then you are a fool. Don't be mad at me - the Lord said it. According to that, I've been a fool in my life. According to that, I've also learned to be more wise.

I'm not saying you can't spend any money. Remember how I told you, last month, that you could spend $100 a month on spandex and $30 on tube socks? You sure can, and that's fine as long as you can afford it, plan to spend that much, and are all set with your financial plan and obligations. You can live your life - that's what money is there for. Money is for impacting the things and people you care about. I'll take that a step further. Saving money is for impacting the things and people you care about. We had a member of the class share a story about how her mother-in-law spends all she makes, has nothing set aside for retirement, and one day will have to rely on her only son (and his wife) to take care of her. If she were wise and prudent, she would have money in savings not only to impact HER life when she retires, but to impact the lives of those she cares about.

You cannot just roll through life living for today, because tomorrow is coming and it's not going to be pretty if you haven't planned ahead. Dave has a little saying that I just love. "Live like no one else, so that later you can LIVE like no one else." That means to scrimp, save, sacrifice today, so that one day you don't have to live that way and you can truly enjoy life.

There are 3 Things that you save money for:

1. Emergencies
2. Purchases - don't ask "how much down?" - ask "how much?"
3. Wealth Building

The first thing I want to touch on is the Emergency Fund. The very first step to financial freedom is the $1000 mini emergency fund. This is the very first step because it is the most important. You cannot learn to walk until after you crawl, which is why we do these baby steps in order.

This is for EMERGENCIES ONLY! That couch is not an emergency; the TV on sale is not an emergency. Christmas, Birthdays, and school clothes are NOT emergencies. All of those things can be planned for. The emergency fund is for TRUE emergencies - the car breaks down, the AC needs to be fixed, ER trips. When you use the Emergency Fund, you replenish it as quickly as you can. It's purpose is to keep you from going into more debt when life happen, and we all know that life happens.

If you have an emergency fund, you do not need a credit card for emergencies. Seriously, you don't. We've lived the last 3 1/2 years without a credit card, and we've managed just fine without one. We've even had 3 kids in the last 3 1/2 years, and we've done it without going into more debt. The emergency fund takes the place of any credit card. If the car breaks down, you just fix it. If the kids need to go to the ER, you just go. You know the money is there.

The third baby step to financial freedom is a fully-funded emergency fund of 3-6 months expenses. *step 2 is pay off debt which is the next class* You may wonder why we don't do this step first. 1. Because it takes a long time to put that money together. This fund usually consists of $10,000-$15,000 and if you're in debt, it will take you a lot longer to pull this money together. When we first started out, we had $1.50 left over at the end of each month. If we'd made this our first step, we'd still be trying to pull it together. 2. It makes more sense to get it together after you're debt free (except your house). Would you borrow $15,000 at 9% interest to put it in the bank to gain .4% interest? No because that doesn't make much sense. Well, if you have that much money in savings and you're in debt, that's what you're doing. You are not making your money work for you. If you were to use that $15,000 to pay off debt, you'll be debt free faster and then be able to rebuild that fully-funded emergency fund.

Again, this is for emergencies ONLY.

Both the mini and the fully-funded emergency funds should be accessible, but not TOO accessible.

Where Do I Keep My Emergency Fund?

The first place you can choose is in a savings account at a local bank or credit union. I say local banks or credit unions because you will get better customer service and you will be supporting local business. With the big banks wanting to take federal bail out money, there will be a lot of changes and upheavals going on, so I avoid them like the plague, personally. I also suggest setting up the savings account separate and apart from your typical checking account. It makes it too easy to dip into savings when they are linked together.

The second place is in a money market account, with check writing capabilities. This is not the best place for the $1000 emergency fund, but it is exactly where the fully-funded emergency fund needs to be. There is a limit on how many checks you can write each month, and if you ever had to live off your full emergency fund, you can write yourself a check every month and then use your normal checking account as you typically would.

The third place is in an ING Direct Orange savings account. They are insured through the FDIC, but all of the banking is done online or over the phone. I will often tell people who have a hard time staying out of their Emergency Funds to put their money there because it's a little harder to access. There is a 2 business day transfer period, so you really have to think about what you are going to spend your money on. This is where we have our emergency fund, and we have not had any issues with the 2 day waiting period. An ING direct orange savings account also gains 1.85% interest compared to .42% which is the average of most banks. Contact me if you

The emergency fund is not meant to make you money. It's there to be your safety net.

An emergency fund is Murphy Repellent and insurance against life. We all know who Murphy is, right? Murphy's Law: Whatever can go wrong, will go wrong. Murphy likes to visit people – especially when they begin to change their financial lives around. He just tried to camp out at our house, but because we had the emergency fund, we were able to kick him to the curb super fast. It is Murphy repellent. It keeps him away, but if he does show up, you can get rid of him quickly.

Grandma always told us to save for a rainy day. Well, that rainy day is coming because everyone that has a pulse is going to experience an emergency of some kind. Money Magazine says that 80% of you will have a major negative financial event in any 5-10 year period. That could be a layoff, a loss of a job, hospital bills, a car accident. Something is going to happen. "Now Clarisse, you should be more positive." I AM POSITIVE that it’s going to rain so get your umbrella.

I asked some gals in my online Dave Ramsey Fans group what they thought of having their Emergency Fund. One gal said, “An Eemergency Fund turns an otherwise catastrophic event into simply, an inconvenience.” Another said, “My husband’s job is on the line, knowing that he could lose it at any moment, but between the Fully-Funded Emergency Fund and knowing that I’ve gotten good deals and have gotten food stocked up, it is the most amazing feeling in the world.” Another gal said, “When Murphy strikes, I can still be in control.”

And my favorite is “An Emergency Fund makes a good cushion, and a really great pillow because you’ll be able to sleep at night.”

An Emergency Fund will be the best investment you ever make.